Monthly Archives: June 2016

The Most Popular Ages to Retire

June 23, 2016

Most working Americans aren’t aiming for an early retirement. A recent survey of nearly 5,100 U.S. employees by Willis Towers Watson found that far more working Americans are planning to retire after age 65 (46 percent) than before it (30 percent). And only 2 percent of those surveyed expect to retire before age 55. Here’s a look at when working people are expecting to retire, and the benefits and drawbacks of retiring at each age.

[See: 9 Retirement Planning Deadlines You Shouldn’t Overlook.]

Age 65. Retirement at age 65 seems ideal to nearly a quarter (24 percent) of retirees. Leaving the workforce at 65 often makes sense because you can sign up for Medicare at this age and no longer need to rely on employer-sponsored health insurance. However, most baby boomers aren’t eligible to receive the full Social Security benefit they have earned until age 66. If they sign up for Social Security at age 65 their payments will be reduced by about 7 percent. So, a boomer who is eligible for $1,000 per month at age 66 would get $933 monthly if he begins payments at age 65. For people born in 1960 or later, the full retirement age is 67 and claiming payments at 65 would result in 13.3 percent smaller payments.

Age 70. The second most popular target retirement age is 70 or older, and nearly a quarter of workers say they are planning to work until their 70s, Willis Towers Watson found. Waiting until age 70 to sign up for Social Security will get you 32 percent bigger payments for most baby boomers. That would boost a $1,000 Social Security payment to $1,320 per month. People born in 1960 or later would get 24 percent more by waiting until age 70 to sign up for Social Security. However, only a small fraction of Social Security recipients actually wait until age 70 to claim payments. Delaying retirement until age 70 isn’t possible for everyone. Many people end up retiring unexpectedly early due to a health problem, layoff or to care for a spouse or other relative.

[See: 10 Social Security Claiming Strategies That Work.]

Ages 66 to 69. Some 18 percent of workers say they want to retire between ages 66 and 69. As far as retirement benefits go, this is likely to be a good decision. People who retire in this age range qualify for Medicare and unreduced Social Security benefits. They’re also old enough to take withdrawals from their retirement accounts without incurring the early withdrawal penalty, but aren’t yet required to take withdrawals if they don’t need the money yet.

Ages 62 to 64. The 11 percent of workers aiming to retire between ages 62 and 64 will have the option to sign up for a reduced Social Security benefit. Baby boomers who start Social Security payments at age 62 will get 25 percent smaller monthly payments, which would reduce a $1,000 monthly payment to $750. Those born in 1960 or later who sign up for Social Security at age 62 will get 30 percent smaller payments. People who retire in their early 60s aren’t eligible for Medicare and need to find health insurance form another source. Some companies provide retiree health insurance to departing employees until they qualify for Medicare. You may also be able to buy health insurance through your state’s health insurance exchange. You could take penalty-free withdrawals from your retirement accounts to help cover the cost of the premiums.

[See: 10 Ways to Get Ready for Retirement After Age 50.]

The Willis Towers Watson survey found that financial concerns play a role in the age people expect to retire. Employees who plan to work past age 70 are more likely to report stress, poor health and feeling stuck in their jobs than people expecting to retire sooner. “The only way for many employees to achieve retirement security and overcome inadequate savings is to work longer,” says Steven Nyce, a senior economist at Willis Towers Watson.

Aiming for a specific retirement age can help you decide how much to save and make preparations for retirement. But it’s also a good idea to save a little more than you might need, just in case you find yourself retired ahead of schedule. The timing of your retirement isn’t always within your control.

Emily Brandon is the author of “Pensionless: The 10-Step Solution for a Stress-Free Retirement.”

Getting Stretch IRA Treatment When Using An A-B Trust As An IRA Beneficiary

June 23, 2016

The A-B trust strategy has long been a staple in the world of estate planning to help minimize estate taxes. And even with the increase in the Federal estate tax exemption and the creation of portability of the estate tax exemption, A-B trust planning is still relevant for very high-net-worth clients, and those who may face a lower state estate tax exemption.

However, a significant complication of A-B trust planning occurs when the only (or primary) asset available to fund the trust is a retirement account such as an IRA, given the common desire to obtain “stretch IRA” treatment to minimize taxable distributions from an inherited IRA.

Fortunately, though, the “see-through” trust rules do allow at least some types of A-B trusts to still obtain stretch IRA treatment, particularly in the case of bypass trusts or (properly drafted) QTIP marital trusts, even when created as a testamentary. On the other hand, naming marital trusts or even revocable living trusts outright can result in a total loss of stretch treatment for an inherited IRA.

In addition, it’s notable that even where the see-through trust rules do allow for the stretch of an inherited IRA, the income tax treatment will often be less favorable than naming beneficiaries outright (due to the compressed trust tax brackets). As a result, anytime an A-B trust is being considered as the beneficiary of an IRA or other retirement account, it’s crucial to weigh the non-tax (and potential estate tax) benefits against the likely income tax disadvantages!

Qualifying A “See-Through” Trust As An IRA Beneficiary

Treasury Regulation 1.401(a)(9)-4, Q&A-5 explicitly allows that trusts may be used as the beneficiary of an IRA (or other retirement account), and maintain favorable “stretch IRA” treatment by “seeing through” the trust to the underlying beneficiaries (and using their life expectancies to calculate the stretch).

However, not all trusts receive similar treatment. Some trusts are treated as a “conduit” trust, where only the immediate income beneficiary’s life expectancy must be considered when determining the applicable distribution period for the stretch IRA. Other trusts are treated as an “accumulation” trust, where income and remainder beneficiaries must be considered, as the stretch can only be done based on the oldest beneficiary (with the least favorable life expectancy!). And either of these scenarios may be less favorable for stretch purposes than just naming a surviving spouse outright, which is eligible for special treatment (a more favorable stretch period, and the ability to “reset” the stretch for subsequent beneficiaries).

Post-Death Stretch IRA Distribution Options Depending On Beneficiary Type

The added complication when using a trust as an IRA beneficiary is that just figuring out whether the trust will be a conduit or accumulation trust can be confusing, as the simple label “trust” is incredibly broad and covers a wide range of trusts that might actually be used as the beneficiary of the retirement account after the death of the original owner.

Yet the distinction is important, as the extent to which the IRA can be stretched by the trust – and which life expectancy is used for the stretch – can vary significantly, depending on whether the trust is treated as a conduit or accumulation trust (or is rendered ineligible as a “see-through” trust altogether). Especially since in the context of popular “A-B trust” planning strategies – either created under a revocable living trust, or a testamentary trust established under the decedent’s Will – the trust could be categorized as any of the above!

Below, we examine the implications and issues to consider whether naming an IRA beneficiary a Bypass trust (the “B trust”), a marital trust (the “A trust”), the difference between using a QTIP vs non-QTIP marital trust, and the adverse consequences that may occur if a revocable living trust or an estate are named directly (for those who perhaps weren’t certain which underlying trust to name).

Bypass Trust (Or “Family Trust”) As An IRA Beneficiary

The use of bypass trusts overall is down since the increase in the estate tax exemption to an inflation-adjusted $5M (made permanent going forward under the Taxpayer Relief Act of 2012, and now up to $5.45M in 2016), and especially now that the unused portion of a deceased spouse’s estate tax exemption is portable to the surviving spouse.

Nonetheless, for higher-net-worth couples, bypass trusts remain relevant to shelter future growth above the couple’s $10M+ combined exemption threshold, and some couples may use bypass trusts at lower net worth levels to minimize state estate taxes (given that most states with a state estate tax do not permit state-level portability of the unused state estate tax exemption amount).

To the extent that a bypass trust is necessary, it is generally still more favorable to fund the trust with other assets besides a retirement account first. After all, an IRA left directly to a spouse can be rolled over, which both allows for far more tax-preferenced accumulation due to the more favorable lifetime RMD tables (and being able to wait until age 70 ½), and ensures that a subsequent beneficiary can “reset” the stretch based on his/her own life expectancy. In addition, in situations where there are multiple types of beneficiaries (e.g., individuals and charities), a (pre-tax) traditional IRA is better served to satisfy charitable bequests first (while other assets can be left to family members and receive a step-up in basis). Nonetheless, sometimes a bypass trust needs to be funded, and the only available asset for some or all of that funding is an IRA.

In the case that an IRA is used to fund the bypass trust – especially with a bypass trust intended to shelter assets for estate tax purposes – it’s important to recognize that the trust will almost certainly be an accumulation trust, retaining the RMDs as they leave the retirement account and not passing them through (as doing so would just push the IRA funds back into the surviving spouse’s estate, compounding the estate tax problem that the bypass trust was intended to minimize in the first place!).

As a result, if a bypass trust is used, it is be critically important to follow the trail of income and remainder beneficiaries until the final distribution is scheduled, to ensure that no beneficiary will result in an (even more) unfavorable applicable distribution period than the life expectancy of the surviving spouse. With a(n accumulation) bypass trust, it is especially important to verify that there are no charities or other non-designated beneficiaries on the list of income and remainder, beyond being in a position as mere potential successors, or the stretch treatment may be lost altogether.

In addition, the retirement account owner may wish to consider, while still alive, doing at least a partial Roth conversion to reduce potential taxation on the inherited IRA down the road, given that most/all of the IRA distributions to the trust will likely be retained in the bypass trust in the future, and therefore be subjected quickly to top 39.6% tax brackets for trusts (which begin at just $12,500 of taxable income in 2016!).

Marital Trust As An IRA Beneficiary

For the typical “AB trust” estate plan, the “B” trust is a bypass trust, and the “A” trust is the marital trust for the outright benefit of the spouse, either to be subsequently held in trust (but freely accessible) for the surviving spouse’s lifetime, or created at the death of the first spouse but then distributed outright immediately to the surviving spouse. (For discussion of marital QTIP trusts, see next section.)

In practice, a marital trust (of the non-QTIP variety) will rarely ever be a favorable beneficiary for a retirement account. The reason is that by naming the trust instead of the surviving spouse directly, that surviving spouse will lose the ability to do a rollover of the IRA into his/her own name to obtain the most favorable spousal treatment (including waiting on required minimum distributions until turning age 70 ½, being subject to RMDs using the Uniform Life Table, and re-naming a new beneficiary for a new stretch after that surviving spouse’s death). Instead, the trust will be subject to RMDs as a non-spouse designated beneficiary; if the spouse is the primary/sole beneficiary, the trust can at least wait to begin RMDs when the original decedent would have turned age 70 ½ (under Treasury Regulation 1.401(a)(9)-5, Q&A-7(c)(3), Example 2), but will still be stuck with a less favorable applicable distribution period (single life instead of the [joint] uniform life table), and no ability to re-set the stretch for subsequent beneficiaries after the death of the surviving spouse.

While such a trade-off – less favorable spousal rollover treatment in exchange for the use of a trust – may be appealing if there is some asset protection, control, or estate tax savings associated with the trust, in the case of a marital trust none of those benefits are available. Thus, the spouse-via-marital-trust beneficiary receives a less favorable outcome for stretch IRA purposes, with no offsetting (tax or non-tax) benefit. (Though notably, since distributions to a marital trust flow through to the surviving spouse, at least all IRA distributions will be taxed at the surviving spouse’s tax rates, and not be subject to compressed trust tax brackets!)

In fact, because the use of a marital trust as the beneficiary of a retirement account often turns out to be a mistake, there are now several instances where a spousal beneficiary has requested a Private Letter Ruling from the IRS where a marital trust was “accidentally” named as the beneficiary and the spouse wanted to roll the IRA funds “through” the marital trust to the surviving spouse. In scenarios where the surviving spouse was the sole beneficiary, and had full dominion and control over trust assets, and the trust allowed non-pro-rata in-kind distributions to its beneficiary, the IRS actually has allowed the surviving spouse beneficiary to “correct” this mistake (see PLRs 200210066, 200236052, 200317032, and 200406048). Nonetheless, obtaining a PLR to “fix” the situation merely results in the same outcome as would have occurred by simply naming the spouse directly, but with a significant amount of added time, hassle, and the non-trivial cost of a filing fee up to $18,000 (plus legal expenses) to obtain a private letter ruling in the first place.

Which means in short, if the ultimate goal is to leave the IRA for the spouse’s sole benefit anyway (and not use a bypass trust in the first place), the best way to do so is by naming the spouse as the outright beneficiary of the IRA, not a (non-QTIP) marital trust for the spouse’s benefit. Alternatively, if a trust is desired for some other reason (e.g., to have a successor trustee in the event of incapacity), consider other means for incapacity planning (such as simply having a Power of Attorney in good order!).

(Marital) QTIP Trust As An IRA Beneficiary

In the case of a marital QTIP trust, the trustee can limit the surviving spouse’s access to the trust principal, which may be important in planning situations like a second marriage (where the decedent wants to ensure that the remaining trust principal be held for children from a first marriage). As a result, when using a marital QTIP trust, there is a reason to leave money in trust “for” a spouse but give up the more favorable tax treatment of a spousal rollover: because of the greater control that the QTIP trust allows, in situations where that control is important to achieve (non-tax) estate planning goals.

Notably, QTIP trusts are required to pay all (accounting) income annually to the surviving spouse as a condition for QTIP treatment under IRC Section 2056(b)(7)(B)(ii). However, this can lead to confusion given that for accounting purposes, RMDs are not necessarily treated as “income” (even though they are all income for tax purposes).

As a result, a QTIP trust that must pay all (accounting) income is not necessarily a conduit trust for trust-as-IRA-beneficiary purposes. In fact, given that the RMD from an IRA under Section 409(c) of the Uniform Principal and Income Act (UPIA) is only 10% income and 90% principal (regardless of the actual underlying investment results), naming a QTIP trust as beneficiary of a retirement account may not only fail to qualify for conduit trust treatment, but naming a QTIP trust that is structured as a conduit trust (passing through all RMDs annually) can actually still fail to meet the requirement for passing through “income” under a QTIP trust in the first place!

To address this potential mismatch in what constitutes “income” for accounting and tax purposes, the IRS has declared under Revenue Ruling 2006-26 that when an IRA is payable to a QTIP trust, in order to ensure that the “income for spouse” requirements are met for QTIP status, the trust should either allow the spouse to demand all “income” from the IRA using a reasonable apportionment of the actual total return of the IRA, use state law to determine a reasonable apportionment between income and principal based on the underlying account (and not looking to the RMDs), or simply pay out at least a 4% unitrust amount to the spouse.

While these provisions will ensure that the QTIP trust meets its obligations for passing through income to qualify as a QTIP, the trust itself still may not be treated as a conduit trust when determining what the RMDs to the trust should be. After all, it is still possible that the RMD (especially in the later years) may be greater than the amount that will be paid out, which in turn means that a portion of the RMDs could be accumulated for subsequent beneficiaries. As a result, a QTIP trust will generally still be an accumulation trust, and thus still have to look to subsequent underlying beneficiaries to determine the applicable distribution period. This also means that the presence of multiple beneficiaries (spouse as income and subsequent beneficiaries as remainder) will prevent the trust from taking advantage of the special rules for surviving spouse beneficiaries (delaying post-death RMDs until the original decedent would have turned age 70 ½) and instead must begin in the year after death based on the oldest trust beneficiary’s single life expectancy.

In order for a QTIP trust to actually be treated as a conduit trust (which may be appealing to obtain the more favorable spouse-as-trust-beneficiary stretch treatment), the trust would need to specify that payouts each year will be the greater of the actual RMD or the amount necessary to satisfy the “income” distribution for QTIP purposes – ensuring that in any particular year, both the QTIP and conduit trust requirements are met. On the other hand, it is again important to note that conduit trust provisions will ultimately push more money through the QTIP trust to the underlying surviving spouse beneficiary (potentially almost all of the IRA if the spouse lives to his/her life expectancy!). So if the goal is to limit the spouse’s access to the trust principal in the first place, it may ultimately be preferable for the trust to not be a conduit trust and instead be an accumulation trust, accepting the less favorable stretch treatment in exchange for the (maximal available) control of the QTIP trust.

Revocable Living Trust Or Testamentary Trust As An IRA Beneficiary

In the case of naming an IRA owner’s revocable living trust, or a testamentary trust created under the decedent’s Will, as the beneficiary of the IRA, the consequences will depend on the terms of the trust itself. To the extent the trust is structured to hold funds in further trust for asset protection or spendthrift purposes, or as a bypass trust, the stretch is generally possible as discussed earlier. In other words, to the extent the trust is otherwise eligible as a designated beneficiary to stretch an IRA, the fact that it was/is created under a revocable living trust or as a testamentary trust under a Will is not necessarily a factor.

However, while naming trusts created under a Will or revocable living trust is not necessarily problematic, how the trust is named in the beneficiary designation can create potential problems if not done correctly.

For instance, in some cases the retirement account owner simply names his/her estate, so that the assets of the estate may be distributed according to the Will – including potentially allocating the IRA to a testamentary trust – and it’s not necessary to determine up front who in particular will receive the IRA (the testamentary trust or some other IRA). Unfortunately, though, because the estate itself is named as the beneficiary, no see-through treatment is possible (as that is only permitted for a trust beneficiary, not an estate as IRA beneficiary), and the retirement account will generally be subject to the 5-year rule (or the decedent’s remaining life expectancy if death occurred after the required beginning date). If there is a desire to stretch through a trust created under the Will, the retirement account’s beneficiary designation form should not name the estate, but instead should explicitly and directly name that testamentary trust created under the Will – e.g., “100% to the Family Trust created under Article 4, Paragraph 1, of my Last Will and Testament dated 1/7/2010”.

Similarly, while it may be appealing to name a decedent’s revocable living trust as the beneficiary, again to leave flexibility about deciding where the IRA will go until after death (where the revocable living trust can determine if it will go to a spouse, a bypass trust, or some other trust beneficiary), doing so may also be problematic.

The reason is that while a revocable living trust will generally become irrevocable at the death of the IRA owner (one of the key requirements for see-through trust treatment), if the revocable living trust is named directly, then all beneficiaries under any provision of the trust must be considered for the stretch. This will potentially result in an unfavorable applicable distribution period (by “accidentally” including an older beneficiary), or the inclusion of a non-designated beneficiary that will ruin the stretch altogether (e.g., a charity named as a beneficiary of any dollar amount anywhere in the revocable living trust could ruin the stretch treatment!). Again, if there’s a desire to see IRA funds flow to a particular subtrust created under the revocable living trust, and qualify for a stretch, it is better to name that subtrust directly (and avoid having any other trust beneficiaries or sub-trusts included). For instance, the beneficiary designation might read “100% to the Family Trust created under Article 5, paragraph 2 of my Revocable Living Trust dated 4/11/2011” which would thereby avoid the inclusion of any beneficiaries named elsewhere in the revocable living trust document.

On the other hand, it’s important to note that naming someone else’s revocable living trust – e.g., a spouse’s revocable living trust, or some other individual’s trust – will not be eligible for a stretch at all, as another person’s revocable living trust remains revocable after the death of the retirement account owner (thereby failing the “trust must be irrevocable at death” requirement under Treasury Regulation 1.401(a)(9)-4, Q&A-5(b)(2)).

Notably, this same problem is often also true of naming a couple’s joint revocable trust, which generally remains revocable after the death of the first spouse. In such situations, the trust will fail to qualify as a designated beneficiary trust eligible for see-through treatment in the first place, because it is not irrevocable (and/or did not become irrevocable at death) as required.

If there is a desire to obtain the stretch for a beneficiary who has their own revocable living trust, such beneficiaries should be named as beneficiaries directly (and not their revocable living trust). Or alternatively, a separate trust should be established for their benefit that is actually irrevocable at the death of the retirement account owner, or earlier, which can be named as the retirement account beneficiary instead.

A-B Trust Planning With Retirement Accounts

Ultimately, the good news is that many of the subtrusts used in A-B trust planning really can be used as the beneficiary of an IRA to accomplish estate planning objectives. However, in most cases, the trust will receive at least slightly less favorable (but still acceptable) income tax and/or stretch treatment (e.g., with a Bypass trust). Sometimes, though, the treatment is significantly less favorable treatment (e.g., in the case of a non-QTIP marital trust, or naming a revocable living trust or estate outright), so much that the tactic should probably be avoided.

To say the least, this means that it’s necessary to carefully weigh the non-tax benefits of the trust against the disadvantages of using the trust to make a final decision. Though notably in some cases, as discussed above, the structure of a trust, or the way it’s named in a beneficiary designation, can at least somewhat improve the tax and stretch treatment!

Rules For Common Types Of Trusts As Beneficiary Of IRA

Filial Friday: Georgia Supreme Court Rules that No Equitable “Right of Access” is Created by Filial Support Law

June 23, 2016

Adult daughter Tamara Williford filed a petition for equitable relief in February 2015, seeking a Georgia court’s order that her father’s current wife must allow her access to her father.  Williford alleged that her father,  Tommy Brown, was in poor physical health, unable to leave his home, but in good mental condition.  She said she had talked with him regularly by telephone and in person, until his wife prevented her from doing so.

Apparently Mrs. Brown, Tommy’s wife, was named as the only defendant in the lawsuit, and responded by denying Williford was a biological child, denying her husband was in poor health, and denying that he wanted to see Williford.

In June 2016, the trial court dismissed Williford’s petition, and she took a timely appeal to the Georgia Supreme Court. Oral argument was held in February 2016.

In Williford v. Brown decided May 9, 2016, the Georgia Supreme Court (pictured above) unanimously affirmed the dismissal, finding that there was no statutory or other legal grounds alleged that would support the “equitable remedy” sought by Ms. Williford.  Specifically, the court rejected the argument made on appeal that Georgia’s version of a filial support law, OCGA Section 36-12-3, provided grounds for relief.  That statute says:

The father, mother, or child of any pauper contemplated by Code Section 36-12-2, if sufficiently able, shall support the pauper. Any county having provided for such pauper upon the failure of such relatives to do so may bring an action against such relatives of full age and recover for the provisions so furnished. The certificate of the judge of the probate court that the person was poor and was unable to sustain himself and that he was maintained at the expense of the county shall be presumptive evidence of such maintenance and the costs thereof.

The court concluded that this section “does not purport to confer on adult children a right to unrestrained visitation” with  parents.  “Moreover, Ms. Williford did not allege in her petition that Mr. Brown is a ‘pauper,’ much less that she believes that Hart County has or will ever have to maintain him at county expenses and then pursue an action against her.”

In a footnote to the ruling, the court observes that the daughter “did not alleged and does not claim on appeal” that the wife prevented her husband “from leaving his home or communicate with persons other than Ms. Williford.” Therefore, the court said it was not necessary to address whether a theory of “general habeas corpus” where a person was allegedly held “incommunicado illegally and against his will.”

This seems like a very sad case. One Georgia elder law attorney suggests that “if the ruling in this case disturbs you, then perhaps it is a good time to call your local legislator.”  

In Sumner Redstone Affair, His Decline Upends Estate Planning

June 23, 2016

With a fortune estimated at over $5 billion, Sumner M. Redstone could afford the best estate planning that money could buy.

What he ended up with is a mess — no matter the outcome of the welter of lawsuits swirling around Mr. Redstone, the ailing media mogul who turned 93 last Friday.

A lawsuit brought by Manuela Herzer, one of Mr. Redstone’s late-in-life romantic partners, stripped him of whatever dignity he might have hoped to retain by publicly revealing humiliating details about his physical and sexual appetites and his diminishing mental capacity. A medical expert said Mr. Redstone suffers from dementia that’s “toward the severe end of moderate.”

That case was dismissed last month, but the testimony was just the curtain raiser for a far more important showdown now unfolding between Mr. Redstone’s previously estranged daughter, Shari Redstone, and the man who had seemed to be his handpicked heir apparent, Philippe Dauman. The fate of the Redstone-controlled CBS and Viacom hang in the balance.

Mr. Dauman is the chief executive of Viacom, and was — until recently — Mr. Redstone’s longtime confidant and a trustee of the trust that controls 80 percent of National Amusements (his daughter owns the remaining 20 percent). National Amusements in turn owns 80 percent of the voting stock in both CBS and Viacom.

Mr. Dauman now finds himself in the seemingly contradictory position of arguing that Mr. Redstone, as his lawsuit asserts, “suffers from profound physical and mental illness,” only months after he said in court papers filed in Ms. Herzer’s case that Mr. Redstone was “engaged and attentive.” (Mr. Dauman maintains in his lawsuit that Mr. Redstone has deteriorated since then.)

Mr. Redstone “now faces a situation where it appears that people around him are competing for control and each has their own objectives,” said Georgiana Slade, head of the trusts and estates group at the law firm of Milbank, Tweed, Hadley & McCloy in New York. “It seems that many people with an interest are attempting to influence decisions related to his estate, the trust and Viacom. But the real question should be: What does Mr. Redstone himself want?”

While it may be an extreme example of the high stakes and chaos that can result, “the Redstone pattern is happening in epidemic proportions,” said Kerry Peck, an estate planning specialist and managing partner at Peck Ritchey in Chicago and a co-author of the book “Alzheimer’s and the Law.”

“Caregivers in particular, often younger women, are ingratiating themselves into the lives of older men,” Mr. Peck said. “They meet them at places you’d consider safe, like senior centers, churches and synagogues. They start as caregivers, and then they become romantic suitors. We’re seeing these scenarios with stunning frequency.”

The Battle for Sumner Redstone’s Empire

War has spread across the empire of Sumner Redstone, one of the entertainment industry’s most tenacious titans. At stake are the fortunes of his family and confidants, as well as the fate of Viacom and CBS.



War has spread across the empire of Sumner Redstone, one of the entertainment industry’s most tenacious titans. At stake are the fortunes of his family and confidants, as well as the fate of Viacom and CBS.

As Americans live longer and more families are forced to cope with common late-in-life issues like dementia, the problem is getting worse. “It’s a huge issue nationally as the elderly population grows and their minds start to falter,” Ms. Slade said. “I’ve seen charities coming after people for multiple gifts: Sometimes these donors don’t remember that they already gave the previous week. Romantic partners, caregivers who take advantage of the elderly — we’re seeing it all.”

Elderly people may be especially susceptible to the influence of people who happen to be around them during their waning days. Ms. Slade and other Milbank lawyers were co-counsel to the public administrator overseeing the estate of Huguette Clark, the reclusive heiress who died in 2011 at the age of 104.

Despite good health, she lived the last 20 years of her life in New York hospitals. She bestowed lavish gifts on various caregivers ($31 million to one nurse) and left the bulk of her $300 million fortune to her nurse and a charitable foundation controlled by her lawyers and accountant, to the exclusion of family members. The family challenged the will in court and Milbank, on behalf of the public administrator, sought to recoup the gifts for the estate. The cases were settled and family members said they hoped to call attention to a growing problem of elder abuse.

“This is an issue for lots of people of even modest wealth,” said David M. English, a professor of trusts and estates at the University of Missouri School of Law and former chairman of the American Bar Association’s commission on law and aging.

Professor English said the most common approach is the creation of a trust, either revocable (which means it can later be changed) or irrevocable, that anticipates such a problem and defines what the creator of the trust means by incapacity. This could be a much less rigorous standard than is typically applied by courts in the absence of such a definition.

“The document should define the meaning of incapacity and, more importantly, indicate who determines incapacity,” Professor English said.

Mr. Redstone created such a trust, but it cedes little control to others as long as he remains alive, and it doesn’t specifically define incapacity. According to his lawyers, his trust is irrevocable, but Mr. Redstone is the sole beneficiary as long as he’s alive, and he has the power to remove or add trustees unless he’s “incapacitated.”

“This can occur only if Mr. Redstone is adjudged incompetent by a court, or upon the delivery of a document signed by three doctors stating that, based on medical evidence, he is unable to manage his affairs in a competent manner,” according to a court filing by Mr. Redstone’s lawyers.

Who controls the seven-trustee board of his trust is critical, since the National Amusements trust will control Mr. Redstone’s assets, including his dominant stakes in CBS and Viacom, should Mr. Redstone die or be deemed incapacitated. Though long at odds with Ms. Redstone (who is a trustee, as is her son), Mr. Dauman and the other four nonfamily trustees seemed safely in charge as long as they retained Mr. Redstone’s support.

Huguette Clark, who died in 2011 at 104, left most of her fortune to a nurse and a foundation run by her lawyers and accountant. Credit Associated Press

But last month, Mr. Redstone abruptly dismissed Mr. Dauman and another longstanding trustee in what Mr. Dauman called “a shameful effort by Shari Redstone to seize control.”

Mr. Dauman and his co-trustee filed suit in Massachusetts (where Mr. Redstone’s trust was created) to have their dismissal deemed invalid on grounds that Ms. Redstone had isolated her father and was exercising undue influence over him, all claims that Ms. Redstone denies. The trial is scheduled to begin next week.

Mr. Redstone’s lawyers filed suit in Los Angeles, seeking a ruling that the trustee changes were valid. Which court would prevail in the event of inconsistent rulings could be the subject of yet another round of litigation.

Mr. Redstone’s mental capacity is a central issue in both the California and Massachusetts lawsuits.

“In drafting a trust like this, you need very clear standards and protocols for determining capacity,” Ms. Slade said. An elderly client, she added, “will often require the assistance of a lawyer to protect him from himself in his old age.”

She emphasized that different decisions might require different standards for determining capacity. “The real question,” Ms. Slade said, “is does someone have the capacity for the decision at issue? It’s one thing to be deciding what you want for dinner and something very different to decide who should be running a major corporation.”

Well-drafted trusts can make such distinctions. Mr. Redstone “could have avoided many of these problems if he’d created a trust that allowed a majority of trustees to conclude that he didn’t have the capacity to remove trustees,” Mr. Peck said. Trusts often contain such a provision that automatically goes into effect when the creator of the trust reaches a designated age, such as 75 or 80.

But sometimes no amount of legal advice can save people from an unwillingness to face their own mortality and cede control while still in full control of their faculties.

“There aren’t any sympathetic characters here,” said Jeffrey Sonnenfeld, a professor at the Yale School of Management and author of a book on corporate succession, “The Hero’s Farewell: What Happens When C.E.O.s Retire.”

“Sumner Redstone,” Mr. Sonnenfeld said, “brought this mess on himself.”

Medicare’s Efforts To Curb Backlog Of Appeals Not Sufficient, GAO Reports

June 23, 2016

Despite interventions by Medicare officials, the number of appeals from health care providers and patients challenging denied claims continues to spiral, increasing the backlog of cases and delaying many decisions well beyond the timeframes set by law, according to a government study released Thursday.

The report from the Government Accountability Office, said the backlog “shows no signs of abating.” It called for the Department of Health and Human Services to improve its oversight of the process and to streamline appeals so that prior decisions are taken into account and repetitive claims are handled more efficiently.

Growing Wait Time

The average wait for a Medicare appeal decision by an administrative law judge has spiraled over the past eight years.

Source: Office of Medicare Hearings and Appeals

GAO investigators cited significant increases in cases filed at each of four stages of appeals. They found a 62 percent rise at the first level from 2010 through 2014, while appeals filed at the third stage — which are heard by an administrative law judge — had a nearly ten-fold increase during the same period.

HHS officials have acknowledged the problem. Although a judge is required to issue a decision within 90 days, the average time from hearing request to decision is slightly more than two years, Nancy Griswold, the chief administrative law judge of the Office of Medicare Hearings and Appeals, said in an interview.

Requests for hearings increased “so dramatically and so quickly over the past four or five years — during a period of time when our adjudication capacity was not able to keep up for funding reasons — we were drowning” in appeals, she said. “It is not quite as bad right now, but we are unable to keep up with [those] that are coming in the door.”

The GAO report said HHS attributed the increases in appeals to a greater interest by hospitals and doctors to file appeals and to enhanced efforts on the government’s behalf to check for inappropriate payments, including a controversial program known as recovery audits, in which contractors inspect hospital payment records to find any errors.

The report was requested by Sens. Orrin Hatch, R-Utah, Ron Wyden, D-Ore., and Richard Burr, R-N.C., who said the findings underscore the need for Congress to fix the problem. They have offered a bill, approved by the Senate Finance Committee, that they say would address many deficiencies by improving HHS oversight and establishing a voluntary dispute resolution process, among other things.

“The voices of too many patients, providers and states are going unheard because the gears of the Medicare audit and appeals system have ground to a halt,” Wyden said.

In response to the findings, HHS Thursday issued an 11-page “primer” describing how officials have tried to cope with the situation. That included one intervention that that let hospitals settle their claims for 68 percent of the value in 2014. Officials also offered ideas for streamlining the appeals process. These include investing new resources at each level of appeal, administrative actions to encourage resolution of cases earlier in the process, supporting legislation providing additional funding and expanding the agency’s powers.

For example, the agency is proposing that cases involving disputes of less than $1,500 should be reviewed by its senior attorneys instead of holding a hearing before an administrative law judge.

However, that idea worries at least one consumer advocacy group.

“We would prefer more judges instead of a stopgap measure,” said Alice Bers, an attorney with the Center for Medicare Advocacy who is handling a class action lawsuit on behalf of beneficiaries.

The appeals office is already working to help curb the backlog by converting to an electronic case management system. Starting in August, appeals can be filed by computer.

For hospitals, the appeals delay has tied up billions of dollars in disputed claims, according to the American Hospital Association, which has sued the government to speed up the decisions. The hospitals have argued that Medicare’s recovery audit contractors (RACs) unnecessarily reject payments and that hospitals frequently win the appeals.

“We are skeptical that anything short of fundamental reform that addresses the RACs’ contingency fee structure, which encourages them to inappropriately deny claims, will have a lasting impact on the backlog,” said Melissa Jackson, the association’s senior associate policy director.

In another intervention, which Griswold called “one of our success stories,” Medicare officials have prioritized appeals from beneficiaries so that they are processed ahead of those from hospitals, doctors and other health care providers. That policy began in 2014, and as a result, the average time for a beneficiary to get a decision from an administrative law judge is 68 days, she said.

Griswold said the policy would continue “as long as there is a backlog.”


States Are Using Flexibility to Create Successful, Innovative Medicaid Programs

June 23, 2016

State Medicaid programs across the country are tailoring services and models of care to local needs in ways that streamline health care delivery and improve health.  These innovative models demonstrate that current Medicaid rules allow states significant flexibility, and disprove claims by proponents of block-granting Medicaid or imposing a per capita cap, as the House Republican budget plan would do, that current Medicaid rules inhibit state reforms.[1]

Well before health reform expanded Medicaid coverage for millions of low-income adults, states began changing how they deliver Medicaid services to help ensure that beneficiaries receive appropriate, timely, and cost-effective care.  The challenge of meeting the needs of newly covered adults with complex health conditions has reinforced the importance of better organizing the delivery of care, as has research showing that the highest-need beneficiaries drive a large share of Medicaid spending.  (Five percent of beneficiaries account for more than half of program costs.[2])  Improved coordination of care can improve individuals’ health outcomes while averting unnecessary costs to the health system.

At the beneficiary level, new programs are beginning to coordinate physical and behavioral health care services as well as social services.  At the system level, states are moving to integrate services for their most vulnerable beneficiaries by improving how they communicate and share data across providers and systems, which can ensure that effective health services are provided in a timely way without the need for intensive coordination at the beneficiary level.  These coordination and integration efforts are improving health outcomes and making Medicaid more efficient by bridging the gap between health care and other services, such as housing assistance.


Distribution of Medicaid Expenditures among Medicaid-Only Enrollees


Using existing state flexibility under Medicaid, for example:

  • Missouri has established “health homes” that coordinate care for beneficiaries with chronic physical health conditions or a diagnosed serious mental illness.  Early data from the program show a significant drop in emergency department visits and preventable hospitalizations.
  • Tennessee is one of 44 states participating in the Money Follows the Person program, which helps Medicaid beneficiaries safely and successfully transition from nursing facilities to their own homes, the home of a caregiver, or a community-based residential facility.  Tennessee’s program has produced significant state savings by reducing unnecessary nursing facility stays.
  • Participants are significantly more likely to report that their health needs are being met.A Wisconsin hospital is testing a new way to integrate health services for children with complex medical needs, a rapidly growing group with high health care costs.  Participants are significantly more likely to report that their health needs are being met.
  • Oregon has established, through a waiver, accountable care organizations — groups of providers and other entities that partner to provide a range of health care services in a coordinated way — to integrate hospital-based services with primary care, behavioral health care, and other social supports.  Oregon has seen emergency department visits and preventable hospital admissions fall significantly, while lowering its growth in Medicaid spending per beneficiary by two percentage points below the levels that are projected in the absence of the waiver.

Even as states experiment with new and effective ways to provide care, some policymakers continue to call for fundamentally restructuring the federal Medicaid financing system in the name of expanding state flexibility, which they claim would allow states to provide improved care to beneficiaries at lower cost.  Yet the large and growing cuts that would result from converting Medicaid into a block grant or establishing a per capita cap would force states either to provide considerably more state funding for Medicaid, or, as is more likely, to institute substantial cuts to eligibility, benefits, and/or provider payments.  Moreover, the resulting financial squeeze could also halt or reverse progress toward further integrating care and strengthening the health care delivery system for Medicaid beneficiaries by changing Medicaid agencies’ focus to making cuts rather than investing in efforts aimed at improving the delivery of care.[3]

Laboratories of Success: Four Examples of State Medicaid Innovation

During Medicaid’s first several decades, beneficiaries had to find their own providers and coordinate their own care, and states reimbursed providers on a fee-for-service basis (that is, for each service they provided).  In the 1980s, states began adopting a range of payment and coordination techniques to better organize care.

Many states now rely on managed care plans to develop networks of providers, ensure that beneficiaries have access to primary care providers, and help beneficiaries coordinate their care.  Rather than paying providers for each service, which may create an incentive to furnish unnecessary, costly services­­­, states pay a capitated rate, where a plan or provider receives a set amount per beneficiary and is responsible for their care.  If payments are set at sound levels, this method can encourage plans and providers to provide the appropriate level of services to keep people healthy while avoiding unnecessary services, which can otherwise drive up costs.

Some states also make capitated payments to groups of providers that coordinate and deliver all the care to their patients while meeting certain quality and cost benchmarks.  Other states pay providers for individual services and offer separate care coordination services to help Medicaid beneficiaries navigate the health system.

For most people, who don’t have complex health needs and receive all their care from a relatively small number of providers, traditional models of care are a significant improvement over an entirely uncoordinated system.  However, people with multiple chronic conditions with an array of providers and needs that go beyond what health care traditionally provides (such as homelessness) still face the burden of coordinating much of their own care even if a group of providers or a managed care plan has an identified care coordinator to help them.  Moreover, people receiving care from multiple health and non-health programs may have several care coordinators, which can be confusing and inefficient.  Recognizing this, many states are moving beyond their initial efforts to coordinate physical health care services to coordinate the larger array of physical and behavioral health care and social services that these beneficiaries need to achieve better health.

In addition to helping individuals navigate the various services they need, states are integrating the design of these services to streamline care for their most vulnerable beneficiaries.  Providers are improving communication and data-sharing techniques to help beneficiaries access appropriate and timely care across multiple systems.  This integration is challenging; many providers communicate and collect data in different ways, both within the health sector and between health and social service providers.  But it can significantly improve care for people with complex needs and also improve efficiency.

The following four examples of innovative models, using four different existing areas of opportunity available to state Medicaid programs, testify to Medicaid’s current flexibility and its support for state and local innovation.

Health Homes: Missouri

Health reform includes enhanced federal Medicaid funding for states to provide “health home” services aimed at providing effective, appropriate care to high-cost, high-need beneficiaries with chronic conditions or serious mental illness.  These services include comprehensive care management, care coordination, support transitioning between institutions or from an institution to the community, and referral to community and social services.

In 2012, Missouri’s Medicaid and mental health agencies established health homes for two groups of beneficiaries: those with multiple chronic conditions and those with a diagnosed serious mental illness.  The program supports care coordination for individuals transitioning from one care setting to another, such as from a hospital to a nursing facility.  It also integrates behavioral health care with primary care services to reduce avoidable hospital stays.  Health home providers are responsible for finding eligible beneficiaries and connecting them with the medical and social services they need.[4]

Every four months, Missouri examines its Medicaid data to identify additional beneficiaries who may be eligible for the health home program and assembles a team of providers (including a care team director, nurse manager, and care coordinator or administrator) to provide needed care.[5]  To ensure that people with physical and behavioral health care conditions get needed services, the program ensures that beneficiaries have access to behavioral health and primary care providers, often in the same location.

Missouri also helps health care providers serve beneficiaries more effectively by providing practice coaches, training, technical assistance, and data management.  Managed care organizations support coordination of care by sharing data with the health home providers, and the health homes receive automated notifications when enrollees are admitted to the hospital.[6]

Early data from the program show a significant drop in emergency department visits and preventable hospitalizations for both the physical and behavioral health groups.  In addition, Missouri saved about $52 in monthly Medicaid spending for every participant.[7]

Money Follows the Person: Tennessee

Many people in nursing facilities don’t need the level of care the facilities provide but can’t return to the community because they lack a home or the support they need to stay in their home.  To address this problem, states are rebalancing Medicaid long-term services and supports away from institutional care in favor of home- and community-based services that help people return to or remain in a community setting.  Medicaid agencies in 43 states and the District of Columbia participate in the Money Follows the Person program, which Congress authorized in 2005 to provide state Medicaid agencies with funding and flexibility to help beneficiaries safely transition from nursing facilities to their own home, the home of a caregiver, or a community-based residential facility.  The Medicaid services provided under Money Follows the Person include many non-traditional services such as home-delivered meals, wheelchair ramps and other home modifications, and support for caregivers.

Tennessee’s Money Follows the Person program relies on managed care plans to provide most of these services.  Health plan care managers develop care plans and help people transitioning out of nursing facilities arrange for the services they need to live safely in their homes.  Once a beneficiary is in the community, the plan monitors the person’s needs and care to ensure a successful transition.[8]  The managed care plans receive a set amount per month for their services, which creates an incentive to provide efficient care and avoid unnecessary facility stays.  Tennessee also offers an additional financial incentive payment to managed care plans that successfully transition nursing facility residents to the community and help them stay there safely.[9]

Between October 2011 and June 2013, more than 620 beneficiaries transitioned to the community through the program.  It has produced significant state savings by reducing unnecessary nursing facility stays.  Based on the state’s estimates, it costs an average of $1,969 per month to serve a Money Follows the Person beneficiary in the community — or about half of the $3,710 monthly average cost to serve an individual in a nursing facility.[10]

Center for Medicare and Medicaid Innovation Grants: Wisconsin

Health reform established the Center for Medicare and Medicaid Innovation (CMMI) to test new health care payment and delivery models.  One model offers a new way to provide care for children with complex medical needs, a rapidly growing group who tend to have very high health care costs[11] and have hospital readmission rates equal to or higher than seniors who are Medicare beneficiaries.[12]  Community-based pediatricians often struggle to meet their needs, and these children and their families often must coordinate care from many different providers — especially when their hospital care is entirely separate from care available in their community.[13]

The Wisconsin Department of Health Services received a CMMI grant to integrate health services for medically complex children enrolled in its Medicaid program.  A team of providers and care coordinators works with the children, their families, and their community-based providers.  The team provides support for families when the child transitions between settings, such as from the hospital to another facility or home.  The program also works with children receiving outpatient care in order to identify children with complex needs and provide them with care coordination and support to avoid unnecessary hospitalizations.[14]

An early evaluation of Wisconsin’s model showed that inpatient hospital days and costs decreased by more than 50 percent after children enrolled in the program.[15]  Evaluation of this and similar models shows that participants are significantly more likely to report that their children’s health needs were being met, and children were more likely to attend primary care checkups and receive scheduled therapies, mental health care, and respite care.[16]

Accountable Care Organizations: Oregon

Accountable care organizations (ACOs) are groups of providers and often other entities such as health plans that partner to provide a range of health care services in a coordinated way.  While the use of ACOs in the Medicare program has received considerable attention, state Medicaid programs are also adopting the use of ACOs.  One Medicaid ACO model pays providers a capitated rate and holds them financially responsible for all of their beneficiaries’ health care services.  ACOs can bridge the gap between clinical care and social service needs by working with other community-based organizations (such as supportive housing providers) to meet the needs of Medicaid beneficiaries.  ACOs can also provide limited services to meet non-clinical needs, such as helping someone without stable housing to find or keep a home.  By integrating hospital-based services with primary care, behavioral health care, and other social supports, ACOs can provide efficient and effective care far beyond what traditional health care providers usually provide.

Oregon established a network of ACOs using a broad federal waiver (known as a section 1115 demonstration) that allows the Department of Health and Human Services to waive statutory requirements to permit testing of innovative state or local models or programs.  The Oregon waiver also set goals to improve health care quality and care delivery in several specific areas, including care management, integration of physical and behavioral health care, re-hospitalizations, and perinatal and maternity care.  Based on these delivery reforms, the waiver also set a goal of slowing the growth in Medicaid per-beneficiary spending by two percentage points below what was projected in the absence of the waiver.[17],[18]

Oregon’s ACOs, known as Coordinated Care Organizations (CCOs), are integrated, community-run organizations responsible for providing all medical, mental health, and dental care services for their members in a specific region of the state.[19]  They receive a capitation payment that grows at a fixed rate.  CCOs collect and report data on more than 30 different measures of health care quality, and 3 percent of their monthly payments are withheld and redistributed among the CCOs based on their achievement of specified quality goals.  Since the waiver’s approval in 2011, Oregon has met its spending goal and has seen emergency department visits and preventable hospital admissions fall significantly.[20]

Oregon’s largest CCO, Health Share, provides Medicaid coverage for three counties, including the city of Portland.  It is governed by representatives of the entities bearing financial risk, which include health plans, providers, and mental health agencies, along with representatives of local organizations and social service providers.  With the Medicaid funds it receives from the state, Health Share pays capitated rates to its contracted health plans and mental health agencies, which are responsible for their members’ care.  Health Share also provides additional care management services in the home or community for its highest-risk members, such as those who have visited the emergency department six or more times in a year.

In its first year, Health Share cut emergency department visits by 18 percent, enrolled 80 percent of its members in an integrated medical home, and earned 100 percent of its potential payments for meeting quality measures.[21]

Medicaid Innovation Leading the Way to Better Health Care Delivery

A number of states are using Medicaid to connect traditionally siloed systems serving their beneficiaries.  States like Missouri have found that providing coordination and care management can both improve health outcomes and reduce unnecessary costs for many of the highest-need Medicaid beneficiaries.  Wisconsin and Oregon are going beyond coordination and moving toward a system of care that is more integrated, where various pieces of the safety net fit together so beneficiaries or care coordinators needn’t navigate multiple systems.

Many other states have used Medicaid to develop innovative approaches to meeting their beneficiaries’ health needs.  California’s new 1115 Medicaid waiver allows the state to offer a range of substance use disorder services in a coordinated way.[22]  Minnesota’s Medicaid ACO, Hennepin Health, provides integrated care to high-need, high-cost beneficiaries in the state’s most populous county.[23]  Colorado is working to integrate physical and behavioral health services and using Medicaid services to help beneficiaries find and keep stable housing.[24]

States have also relied on Medicaid’s ability to expand to meet individuals’ needs when responding to health crises such as water contamination in Flint, Michigan, the devastation caused by Hurricane Katrina, and the large increase in unemployment, resulting loss of health coverage and greater Medicaid enrollment during the last recession.

In sum, Medicaid gives states financial support and considerable flexibility to respond to crises and develop innovative new models of care.

End Notes

[1] Edwin Park, “Medicaid Spending per Beneficiary Would Shrink by Half Under House Budget’s Per Capita Cap Option,” Center on Budget and Policy Priorities, April 2016,

[2] Julia Paradise, “Medicaid Moving Forward,” Kaiser Family Foundation, March 2015,

[3] See Park, op cit.

[4] Kathy Moses and Brianna Ensslin, “Seizing the Opportunity: Early Medicaid Health Home Lessons,” Center for Health Care Strategies, March 2014,

[5] Barbara Ormond et al., “Health Homes in Medicaid: the Promise and the Challenge,” Urban Institute, February 2014,

[6] “Evaluation of the Medicaid Health Home Option for Beneficiaries with Chronic Conditions: Annual Report – Year Three,” Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, July 2015,

[7] See Moses and Ensslin, op cit.

[8] Molly O’Malley Watts, Erica L. Reaves, and MaryBeth Musumeci, “Tennessee’s Money Follows the Person Demonstration: Supporting Rebalancing in a Managed Long-Term Services and Supports Model,” Kaiser Commission on Medicaid and the Uninsured, April 2014,

[9] Jenna Libersky, Debra Lipson, and Kristie Liao, “Hand in Hand: Enhancing the Synergy between Money Follows the Person and Managed Long-Term Services and Supports,” Mathematica Policy Research, July 2015,

[10] Watts, Reaves, and Musumeci, op cit.

[11]Jay G. Berry et al., “Children with Medicaid Complexity and Medicaid: Spending and Cost Savings,” Health Affairs, December 2014,

[12] Jay G. Berry, “What Children with Medical Complexity, Their Families, and Healthcare Providers Deserve from an Ideal Healthcare System,” Lucile Packard Foundation for Children’s Health, December 2015,

[13] Jay G. Berry et al., op cit.

[14] Center for Medicare and Medicaid Innovation, “Health Care Innovation Awards Round Two Project Profiles,” July 2014,

[15] John B. Gordon et al., “A Tertiary Care-Primary Care Partnership Model for Medically Complex and Fragile Children and Youth with Special Health Care Needs, ” JAMA Pediatrics, October 2007.

[16] Dennis Z. Kuo et al., “Health Services and Health Care Needs Fulfilled by Structured Clinical Programs for Children with Medical Complexity,” Journal of Pediatrics, February 2016,

[17] State of Oregon, 1115 Waiver Demonstration Renewal,

[18] Under the waiver, Oregon received upfront increases in federal funding to develop the ACOs, which would be offset by expected savings as the ACOs were fully implemented.  While the state is responsible for reimbursing the federal government if expected savings do not materialize, unlike under a block grant or per capita cap, the state retains financial flexibility for the program to respond to unexpected health care needs, as well as the ability to expand eligibility, add new benefits, and enroll all eligible beneficiaries who apply, as would be the case in the absence of the waiver.


[20] Jim Lloyd, Rob Houston, and Tricia McGinnis, “Medicaid Accountable Care Organization Programs: State Profiles,” Center for Health Care Strategies, October 2015,

[21] Sarah Klein, Douglas McCarthy, and Alexander Cohen, “Health Share of Oregon: A Community-Oriented Approach to Accountable Care for Medicaid Beneficiaries,” Commonwealth Fund, October 2014,

[22] State of California, Medicaid 1115 Demonstration Waiver,

[23] Hennepin Health 2016,

[24] Corporation for Supportive Housing, “Colorado Crosswalk: Improving Medicaid Financing of Supportive Housing Services,” 2015,

Default Judgment Vacated in Claim That Nursing Home Resident’s Daughter Lied on Application

June 23, 2016

A New York appeals court rules that in a lawsuit by a nursing home against a resident’s daughter for allegedly misrepresenting her mother’s asset transfers on the admission application, the trial court properly vacated a default judgment entered against the daughter because the daughter demonstrated a possible meritorious defense against the charges. Baptist Health Nursing and Rehabilitation Center v. Baxter  (N.Y. Sup. Ct., App. Div., 3rd Dept., No. 521981, June 9, 2016).

Ruth Baxter admitted her mother to a nursing home and filled out a preadmission form in which she represented that her mother had not transferred assets within the previous five years. The state subsequently denied the mother’s application for Medicaid benefits, finding that she had transferred assets for less than fair market value.

The nursing home sued Ms. Baxter for fraud and breach of contract, claiming that Ms. Baxter made misrepresentations on her mother’s application for Medicaid benefits. Ms. Baxter did not respond and did not appear in court, so the court entered a default judgment against her. Ms. Baxter moved to remove the default judgment, arguing that she has a meritorious defense to the nursing home’s claims. The trial court granted Ms. Baxter’s motion, and the nursing home appealed.

The New York Supreme Court, Appellate Division, Third Department, affirms, vacating the default judgment. The court holds that Ms. Baxter has demonstrated a potentially meritorious defense by showing that some of the transfers may have been permissible payments to Ms. Baxter for services rendered to her mother. The court notes that at “this juncture, it is unnecessary for [Ms. Baxter] to establish that she is entirely absolved from liability.”

For the full text of this decision, go to:

State Cannot Count Distributions from Special Needs Trust as Income

June 23, 2016

Reversing a lower court, the U.S. Court of Appeals for the First Circuit rules that a state housing authority cannot count distributions from a special needs trust funded by a settlement as income because the payments would not be considered income had the settlement been taken as a lump sum. DeCambre v. Brookline Housing Authority (1st Cir., Nos. 15-1458, 15-1515, June 14, 2016).

Kimberly DeCambre is the beneficiary of a court-established first-party special needs trust that was funded with the proceeds from a $330,000 personal injury settlement. Ms. DeCambre received a Section 8 housing voucher. In fall 2013, the Brookline Housing Authority (BHA), the local agency that administers Ms. DeCambre’s housing voucher, informed her that she was no longer eligible for Section 8 because the trust had disbursed more than $60,000 during the year for her car, phone, Internet, veterinary care for her pets and travel expenses. A hearing officer upheld the BHA’s decision.

Ms. DeCambre filed suit against the BHA in state court and her claims were removed to federal court. Ms. DeCambre claimed that the BHA violated her civil rights by counting the payments from the trust as income, arguing that it was improper to treat the distributions from the trust as income when, according to Department of Housing and Urban Development (HUD) rules, the same payments would not be considered income had she simply taken the settlement as a lump sum outside of a trust. The district court ruled in favor of the BHA, finding there was no regulatory support for Ms. DeCambre’s argument that her trust expenditures must be excluded from her income, and Ms. DeCambre appealed.

The U.S. Court of Appeals for the First Circuit reverses, holding that the “BHA improperly counted the distributions from the principal of [Ms.] DeCambre’s settlement-funded irrevocable trust toward her annual income.” According to the court, “we can discern no reason to exclude from annual income (as the regulations clearly do) lump-sum personal injury settlement proceeds paid directly to a tenant, . . . yet not exclude those same proceeds merely because they ‘[g]o to, or on behalf of’ a tenant, . . . , through a trust of which the tenant is the beneficiary.”

For the full text of this decision, go to:

ElderLawAnswers members Emily Starr and Ron M. Landsman wrote an amicus brief in support of Ms. DeCambre, and the decision acknowledges their work.

For a blog post on the decision by Karen B. Mariscal of Margolis & Bloom, LLP, click here.

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June 23, 2016

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Ending Our Shameful Segregation of Persons with Disabilities

June 10, 2016

NAELA supports care in the community and the greatest amount of independence possible for persons of any age with disabilities.
By Jason A. Frank, CELA, CAP

Segregating persons with disabilities in nursing homes recently received national attention after the Department of Justice found that South Dakota violated their civil rights for this very reason.

Unfortunately, effectively warehousing persons with disabilities is an all too common phenomenon across the United States, not just South Dakota. For those involved and their families, it is nothing short of a tragedy.

Persons acquire disabilities for different reasons, some at birth, others due to an accident, and many from a chronic illness, such as Alzheimer’s or Multiple Sclerosis. Virtually all wish to remain at home, be a part of their community, and not institutionalized.

Many need help with getting out of bed, eating, or going to the bathroom. For those who require extensive long-term supports and services, it can be financially ruinous.

Medicaid provides the majority of these paid services once you qualify. But, the more than 50-year-old law mandates nursing home services and not home and community-based services (HCBS).

Rather, states provide HCBS through optional “waivers” of the Medicaid law, which requires that you be in a nursing home to receive services.

Care in the Community: The Unfinished Civil Right
A turning point came in 1999 when the Supreme Court recognized in Olmstead v. L.C. that the unjustified segregation of persons with disabilities constitutes discrimination under the Americans with Disabilities Act.

Since then, states have expanded home and community-based services: from 18 percent of dollars spent in 1995 to 51 percent in 2013. Importantly, coverage varies significantly by age, state, and the nature of the disability.

In truth, the rights of persons with disabilities to remain at home and in their communities has not yet been actualized.

For instance, my home state of Maryland has more than 25,000 individuals on a “waitlist” for HCBS. But the waitlist itself is a mirage. A miniscule number of people ever actually end up receiving these services without having to go into a nursing home first.

This is unacceptable.

As an Elder Law attorney, I am tired of witnessing far too many families break down in tears when I tell them there is nothing I can do to help them keep their loved one at home because the state does not provide access to HCBS in any meaningful sense.

The Disability Integration Act — Legislation That Would Mandate Care in the Community
That’s why I am so excited about the Disability Integration Act, sponsored by Senate Minority Leader Chuck Schumer (D-NY). The legislation would clarify that HCBS is a civil right.

The legislation would mandate that public entities and insurers:

  • Give individuals the right to choose between HCBS or institutional care;
  • Cannot discriminate against persons with disabilities when providing HCBS;
  • Establish adequate payment structures for HCBS;
  • Inform persons with disabilities of their right to receive HCBS; and
  • Increase affordable and accessible housing options (applies only to public entities).

Hopefully with enough grassroots advocacy, this legislation will become law soon. Until then, far too many persons with disabilities will face segregation in nursing homes with only occasional victories through long, hard-fought litigation.

About the Author
Jason Frank, CELA, CAP, is co-chair of NAELA’s Public Policy Committee. He is a member of the NAELA Board of Directors and is a NAELA Fellow.

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